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By Jay Cost

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Public Financing Is Dead

In a recent interview with the Washington Times, John McCain made the following point:

Sen. John McCain, an architect of sweeping campaign-finance reform who got walloped by a presidential candidate armed with more than $750 million, predicts that no one will ever again accept federal matching funds to run for the nation's highest office.

"No Republican in his or her right mind is going to agree to public financing. I mean, that's dead. That is over. The last candidate for president of the United States from a major party that will take public financing was me," the Arizona Republican told The Washington Times.

The subtext of McCain's comment is a criticism of the Obama campaign. Much of this is valid, as the President explicitly promised to negotiate a deal with Senator McCain on public financing, but never did. However, the death of public financing cannot be pinned solely, or even mostly, on President Obama. It was a long time coming. In fact, I'd wager that some of the other '08 Republican contenders would have refused public financing if they had won the GOP nomination.

Ultimately, the big trouble with public financing is that it is not keeping up with the realities of electoral politics. There are two specific problems.

The first problem is timing. Senator McCain does not mention it (at least in the clip provided by the Washington Times), but one half of public financing has been finished for eight years. Presidential candidates are entitled to public financing in the primaries in the form of "matching funds." However, there is a catch. The government matches a portion of the money you receive from individual donors, but it also places a spending cap on you for the primary seasion, which does not technically end until the conventions.

This greatly damaged Bob Dole in 1996. Dole was stuck in a tough primary battle against Pat Buchanan, Steve Forbes, and Lamar Alexander - and to win, he had to spend through most of his primary funds. This left him running on a bare-bones budget for months. Meanwhile, President Clinton was flush with cash, thanks to the fact that he was unopposed in his primary. The DNC, labor groups, and the Clinton campaign spent the spring and summer blasting Dole, who was unable to offer a response.

The primary financing system fails to account for the fact that the general election campaign now begins well before the conventions. After Dole was shellacked because of the system's antiquated notion of the general campaign, it was only a matter of time until the serious contenders balked at primary funds. George W. Bush refused them in 2000 and 2004 - as did John Kerry.

The second problem is quantity. John McCain - who also declined financing for the primaries - received $84 million in public money at the beginning of September. This is a paltry sum compared to how much a presidential candidate can potentially raise. To appreciate this, consider the following chart, which tracks fundraising by the national party committees back to 1988.

Fundraising by National Party Committees.jpg

What is really amazing about this chart is that eliminationg soft money in 2004 did not reduce party fundraising. It slowed down its rate of growth, for sure, but in 2004 both parties raised more than they did in the last presidential cycle where soft money was allowed (2000).

You can chalk this growth up to increased party capacity to raise cash. The parties have become much more professional over the last twenty years, and thus more able to raise dollars. They also have access to new communications technology like the Internet. Another factor is likely the polarization of the electorate, especially among political elites who have the money to donate to politics. Now more than any time since the Great Depression, there are clear ideological differences between the parties. This distinctiveness gives people a greater stake in the outcome of the election - and possibly an enhanced incentive to contribute to the cause.

I'd also note that this chart only captures a fraction of the total federal dollars raised. Factor in the hundreds of millions of dollars raised by candidates for the House and Senate - which have also been on the rise over the years - and we can appreciate just how many potential dollars are out there. Above all, consider that Obama and Senator Clinton raised a combined $880 million during the 2008 campaign, and yet that did not stop the Democratic Party from smashing its previous fundraising records. Bottom line: the parties have found many new sources of money over the years, and the evidence implies that there are sources yet to be found.

So, why would a presidential candidate accept $85 million when s/he instead has the opportunity to raise hundreds of millions? Only a guy like John McCain - who had a hand in creating the current finance regime and who was honor bound to participate - was so obliged.

Ultimately, these two problems point to the same malady: the public financing system is outdated. It has not kept up with the evolving dynamics of the electoral campaign. The basics of public financing were created during a different era of presidential campaigning (via the 1974 amendments to the Federal Elections Campaign Act). The electoral campaign has changed drastically since then, but the financing system remains essentially the same. Its inability to fit the times has been evident for the last fifteen years or so - thus, it was only a matter of time before it would finally be discarded.

Until Congress updates the basic structure of public financing and/or the system is made mandatory, presidential candidates will skip it. It is so antiquated that it no longer serves their needs. A candidate who follows it will surely be made worse off if his opponent does not.

-Jay Cost